Bargaining over Beauty

The full title of my new paper with Clara Piano is “Bargaining over Beauty: The Economics of Contracts in Renaissance Art Markets.”

Here’s the abstract:

This paper argues that concerns over opportunism affected the content and structure of Renaissance art contracts. Building on insights from the economic analysis of contracts, we first show that opportunism threatened the relationship between buyer—the patron—and seller—the painter—in Renaissance Italy. We then test the effect of opportunism on the contracting process for paintings against a novel data set on the content and structure of ninety documents corresponding to as many commissions. Our results provide evidence that concerns over opportunism had a systematic effect on the trading parties’ choice of how much and what to include in the contract governing their exchange.

A Law and Econ Reading List

As a follow-up to Caleb’s Org Econ reading list, here’s what I’d assign to graduate students in Law and Econ.


Alchian, A. A. (1950). Uncertainty, evolution, and economic theory. Journal of Political Economy, 58(3), 211-221.

Stigler, G. J., & Becker, G. S. (1977). De gustibus non est disputandum. The American Economic Review, 67(2), 76-90.

Becker, G. S. (1993). The economic way of looking at behavior. Journal of Political Economy, 101(3), 385-409.

Barzel, Y. (1997), The Economic Analysis of Property Rights. Cambridge University Press. Chapter 1: The Property Rights Model, pp. 3-15.


Coase, R. H. (1960). The Problem of Social Cost. Journal of Law and Economics, 3(1).

Barzel, Y. (1977). Some fallacies in the interpretation of information costs. The Journal of Law and Economics, 20(2), 291-307.

Allen, Douglas W. (1991). What are Transaction Costs? Research in Law and Economics, 14, 1-18.

Stigler, G. J. (1992). Law or economics?. The Journal of Law and Economics, 35(2), 455-468.



Cheung, S. N. (1970). The structure of a contract and the theory of a non-exclusive resource. The Journal of Law and Economics, 13(1), 49-70.

Johnson, R. N., & Libecap, G. D. (1982). Contracting problems and regulation: the case of the fishery. The American Economic Review, 72(5), 1005-1022.

Lueck, D. (1994). Common property as an egalitarian share contract. Journal of Economic Behavior & Organization, 25(1), 93-108.

Barzel, Y. (1997), The Economic Analysis of Property Rights. Cambridge University Press. Chapter 2: The Public Domain, pp. 16-32.


Umbeck, J. (1977). A theory of contract choice and the California gold rush. The Journal of Law and Economics, 20(2), 421-437.

Ellickson, R. C. (1989). A hypothesis of wealth-maximizing norms: Evidence from the whaling industry. JL Econ. & Org., 5, 83-97.

Lueck, D. (1995). The rule of first possession and the design of the law. The Journal of Law and Economics, 38(2), 393-436.

Barzel, Y. (1997), The Economic Analysis of Property Rights. Cambridge University Press. Chapter 4: Divided Ownership, pp. 55-64.

Libecap, G. D., & Lueck, D. (2011). The demarcation of land and the role of coordinating property institutions. Journal of Political Economy, 119(3), 426-467.


Barzel, Y. (1997), The Economic Analysis of Property Rights. Cambridge University Press. Chapter 8: Wealth Maximizing Constraints on Property Rights, pp. 55-64.

Andolfatto, D. (2002). A theory of inalienable property rights. Journal of Political Economy, 110(2), 382-393.

Allen, D. W. (2002). The rhino’s horn: incomplete property rights and the optimal value of an asset. The Journal of Legal Studies, 31(S2), S339-S358.

Fleck, R. K. (2014). Can prohibitions on price gouging reduce deadweight losses?. International Review of Law and Economics, 37, 100-107.



Alchian, A. A., & Demsetz, H. (1972). Production, information costs, and economic organization. The American Economic Review, 62(5), 777-795.

Barzel, Y. (1997), The Economic Analysis of Property Rights. Cambridge University Press. Chapter 5: The Old Firm and the New Organization, pp. 65-84.

Holmstrom, B. (1999). The firm as a subeconomy. Journal of Law, Economics, and Organization, 15(1), 74-102.

Baker, G. P., & Hubbard, T. N. (2004). Contractibility and asset ownership: On-board computers and governance in US trucking. The Quarterly Journal of Economics, 119(4), 1443-1479.


Cheung, S. N. (1983). The contractual nature of the firm. The Journal of Law and Economics, 26(1), 1-21.

Goldin, C. (1986). Monitoring costs and occupational segregation by sex: a historical analysis. Journal of Labor Economics, 4(1), 1-27.

Leffler, K. B., & Rucker, R. R. (1991). Transactions costs and the efficient organization of production: a study of timber-harvesting contracts. Journal of Political Economy, 99(5), 1060-1087.

Allen, D., & Lueck, D. (1992). Contract choice in modern agriculture: cash rent versus cropshare. The Journal of Law and Economics, 35(2), 397-426.

Allen, D. W., & Borchers, A. (2016). Conservation practices and the growth of US cash rent leases. Journal of Agricultural Economics, 67(2), 491-509.


Posner, R. A. (1980). A theory of primitive society, with special reference to law. The Journal of Law and Economics, 23(1), 1-53.

Allen, D. W. (1990). An inquiry into the state’s role in marriage. Journal of Economic Behavior & Organization, 13(2), 171-191.

Botticini, M., & Siow, A. (2003). Why dowries?. American Economic Review, 93(4), 1385-1398.

Geddes, R., Lueck, D., & Tennyson, S. (2012). Human capital accumulation and the expansion of women’s economic rights. The Journal of Law and Economics, 55(4), 839-867.

Leeson, P. T., & Pierson, J. (2016). Prenups. The Journal of Legal Studies, 45(2), 367-400.


Epstein, R. A. (1973). A theory of strict liability. The Journal of Legal Studies, 2(1), 151-204.

Posner, R. A. (1973). Strict liability: A comment. The Journal of Legal Studies, 2(1), 205-221.

Landes, W. M., & Posner, R. A. (1980). Joint and multiple tortfeasors: An economic analysis. The Journal of Legal Studies, 9(3), 517-555.

Lott Jr, J. R. (1987). Should the wealthy be able to buy justice?. Journal of Political Economy, 95(6), 1307-1316.

Brooks, R. R. (2002). Liability and organizational choice. The Journal of Law and Economics, 45(1), 91-125.


Becker, G. S. (1968). Crime and Punishment: An Economic Approach. Journal of Political Economy, 76(2), 169-217.

Lott, Jr, J. R., & Mustard, D. B. (1997). Crime, deterrence, and right-to-carry concealed handguns. The Journal of Legal Studies, 26(1), 1-68.

Klick, J., & Tabarrok, A. (2005). Using terror alert levels to estimate the effect of police on crime. The Journal of Law and Economics, 48(1), 267-279.

Allen, D. W., & Barzel, Y. (2011). The evolution of criminal law and police during the pre-modern era. The Journal of Law, Economics, & Organization, 27(3), 540-567.



Tullock, G. (1975). On The Efficient Organization Of Trials. Kyklos, 28(4), 745-762.

Posner, R. A. (1993). What do judges and justices maximize? (The same thing everybody else does). Supreme Court Economic Review, 3, 1-41.

Glaeser, E., Johnson, S., & Shleifer, A. (2001). Coase versus the Coasians. The Quarterly Journal of Economics, 116(3), 853-899.

Leeson, P. T. (2012). Ordeals. The Journal of Law and Economics, 55(3), 691-714.


Becker, G. S., & Stigler, G. J. (1974). Law enforcement, malfeasance, and compensation of enforcers. The Journal of Legal Studies, 3(1), 1-18.

Klein, B., & Leffler, K. B. (1981). The role of market forces in assuring contractual performance. Journal of Political Economy, 89(4), 615-641.

Friedman, D. (1984). Efficient institutions for the private enforcement of law. The Journal of Legal Studies, 13(2), 379-397.

MacLeod, W. B. (2007). Reputations, relationships, and contract enforcement. Journal of Economic Literature, 45(3), 595-628.

Leeson, P. T. (2009). The laws of lawlessness. The Journal of Legal Studies, 38(2), 471-503.


Ellickson, R. C. (1985). Of Coase and cattle: Dispute resolution among neighbors in Shasta County. Stan. L. Rev., 38, 623-687.

Posner, R. A. (1997). Social norms and the law: An economic approach. The American economic review, 87(2), 365-369.

Posner, R. A., & Rasmusen, E. B. (1999). Creating and enforcing norms, with special reference to sanctions. International Review of Law and Economics, 19(3), 369-382.

Allen, D. W., & Lueck, D. (2009). Customs and incentives in contracts. American Journal of Agricultural Economics, 91(4), 880-894.

The Artist as Entrepreneur

In the Review of Austrian Economics, my graduate student, Rania Al-Bawwab, and I develop a theory of Renaissance art market organization.

Here’s the abstract:

We develop a theory of the supply side of art markets building on Kirzner’s understanding of entrepreneurship as alertness to profit opportunities. Whereas Kirzner’s entrepreneur is alert to the existence of resource misallocation, the artistic genius is alert to the opportunity of producing aesthetic value out of mundane objects and resources with no such value of their own. Our theory produces an important empirical implication: when market conditions are such that most art is “high art,” the artist will perform both functions, alertness to artistic value and alertness to profit opportunities. Instead, when most art is “low art,” the two functions will belong to distinct individuals. To substantiate our theoretical arguments, we discuss their relevance to the markets for paintings in Renaissance Italy and contemporary visual art.

More on the paper here.

Specialization and the firm in Renaissance Italian art

A new draft of my paper on the organization of the production of Renaissance frescoes and altarpieces is available at SocArXiv.

Here’s a passage from the introduction that summarizes the argument of the manusript:

This paper develops a theory of ownership and specialization on the supply side of the market for Renaissance paintings. This theory explains several features of the economic lives of master painters in Renaissance Italy. First, it sheds light on the propensity of artists to assume residual claimancy over their paintings, own the workshop that produced them, and bear liability over their quality vis-à-vis patrons. Allocating residual claimancy to the artist—as opposed to any of the many other specialized artisans involved in the fulfillment of commissions—economized on the costs of ensuring the performance of tasks that were both more expensive to monitor and more consequential to the ultimate value of the painting. Second, the theory accounts for the division of labor in the production of Renaissance paintings. It explains why even the most talented artists did not fully exploit their comparative advantage and instead performed some more mundane tasks as well. Finally, it provides a rationale for the master painters’ choice of how to allocate the remaining tasks between employees of the bottega and independent contractors. According to our theory, the equilibrium degree of specialization by the artist and the boundaries of his firm are determined by a trade-off between the benefits of specialization, the costs of delegation to a subordinate, and those of delegation to an independent contractor.

Rational Chef Theory?

I have a new paper out at Economics of Governance on the organization of high-end restaurants. The basic question behind the paper was: why are so many Haute-Cuisine chefs also the owners of the restaurants where they work? In trying to figure out an answer, I developed a framework to study the relationship between creativity, ownership of, and the division of labor within, the firm/restaurant. Here’s how I summarize the paper’s key idea in the concluding section:

My approach relies on the conjecture that, in organizing their businesses, entrepreneurs face a tradeoff between the benefits of specialization and the losses from opportunism. If one knows the specific sources of opportunism a firm must overcome in its line of business, one should be able to predict the organizational responses the firm will adopt in the real world. I focus on two aspects of organizational choice: an establishment’s ownership structure and the allocation of tasks within it. I predict that the industry’s characteristics favor the assignment of residual claimancy to the chef and that the chef-owner will also maintain for herself such tasks as the design of the restaurant’s menu and the selection of ingredients. Other tasks, including the preparation of the meal and the management of the establishment’s finances, will fall in the hands of someone else.

Here’s the abstract of the paper:

This paper develops a theory of the organization of high-end restaurants. I identify the high degree of output complexity produced by these establishments as the industry’s fundamental characteristic. This high degree of output complexity leads to reputational investments by restaurants, which in turn affects their organizational structure. In particular, my theory addresses the prevalence of chef-owned establishments in the fine dining industry and the assignment of productive tasks within its kitchens.

Agency Problems When God is the Principal

With my fiancee, Clara Jace, I’ve recently written a paper that puts a new spin on agency theory.

Designing contracts which get the incentives right is a hard enough question under normal circumstances. But what about when God is the principal? Clara and I explore that question.

The Roman Catholic doctrine of in persona Christi Capitis guarantees the validity of a sacrament, regardless of the personal holiness of the clergy administrating it. This suggests that the adoption of in persona Christi Capitis ought to have been accompanied by more stringent screening of candidates for the priesthood. Otherwise, the doctrine opens the door to opportunism. And that’s in fact what we find.

A Different Take on HoET?

This semester, I am teaching a graduate course on the history of economic thought. In it, I take a slightly different approach to the subject than most such classes. I do not follow any chronological order, I do not assign any full books or classics, nor any textbooks. Not that these alternative approaches do not have their advantages.

However, my goal is to show students how economists, mainline and mainstream, have debated specific issues of doctrine that remain crucially important to the professional discourse to this day. Perhaps a bit more unique to my syllabus is the emphasis on topics near and dear to our hearts at CSOC: economic calculation, the division of labor, property rights, and transaction costs. Bonus: No macro! 😉

Check it out.

Coase Goes to War

The Revue d’Économie Politique is running a special issue on the economics of conflict. In my contribution I develop and apply a basic framework to study the evolution of a ruler-principal’s choice of how to compensate their warring-agents.

Here’s the abstract:

Economic approaches to conflict tend to focus on its determinants, on the factors influencing its outcome, and on its consequence to the distribution of resources. Relatively little attention is paid to the ways these parties structure the internal organization of their efforts during conflict. This paper builds on the theory of contract choice to develop a framework for the analysis of military groups. This framework produces predictions on the systematic variation of military organization under different technological and environmental circumstances. These predictions are tested against historical evidence on a variety of historical case studies.

This paper is part of a research project, partly co-authored with Louis Rouanét, that uses basic economic theory to study military history and institutions.